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THE MARKET WHISPERER 21 9
Example of Breakout Target Calculation for Cephalon, CEPH

Cephalon consolidates below the line of resistance in a classic cup and
handle pattern. The distance from the base up to the line of resistance is
100%. When the stock breaks out, it reaches the precise Fibonacci target
of 161.8%. Another interesting case? Or, perhaps just a large number
of traders who believe in the method and take profits at the commonly
accepted target point. Were they actually the ones inhibiting the stock’s
progress at that level because they believed it would be resistance?

Bollinger Bands

These were invented by John Bollinger at the start of the 1980s. Bollinger’s
concept was simple: he drew a moving average line across the chart and
sketched two bands, one above and one below it. In this way, a kind of “tube”
was formed, outlining the stock’s movement. The premise for creating a
tube around the stock’s movement is that the stock can be expected to
move in the future within the same frame in which it moved in the past.

“Tubes” are not a new concept and certainly preceded Bollinger. The
problem with this method is its reliability: in various market conditions,
such as crises, stocks tend to be more volatile and therefore break the
boundaries of the framework more frequently. Bollinger’s innovation
was to set the bands a variable distance from the MA. He did not set the